Discounting With The Discount Rate



Next video:
Loading the player...

The discount rate is the interest rate you need to earn on a given amount of money today to end up with a given amount of money in the future. The discount rate accounts for the time value of money, which is the idea that a dollar today is worth more than a dollar tomorrow given that the dollar today has the capacity to earn interest.

Related Articles
  1. Investing

    Finding A Discount On Your Next Bond Investment

    Discount rates have nothing to do with buying things on sale. Rather, it helps you figure out how much to pay today for a bond or cash flow in the future.
  2. Fundamental Analysis

    What is Present Value?

    Present value tells us how much a future sum of money is worth today, given a specified rate of return. This is an important financial concept based on the principle that money received in the ...
  3. Professionals

    Present Value And Discounting

    It is important to know how to calculate the time value of money so that you can distinguish between the worth of investments that offer you returns at different times.
  4. Economics

    Fed's Discount Rate

    The Federal discount rate is the amount of interest a central bank charges private banks for short-term loans.
  5. Professionals

    Economic Policy And The Federal Reserve

    The government has two tools that it can use to try to influence the direction of the economy. Monetary policy, which is controlled by the Federal Reserve Board, determines the nation’s ...
  6. Fundamental Analysis

    DCF Analysis: Introduction

    By Ben McClure Contact Ben It can be hard to understand how stock analysts come up with "fair value" for companies, or why their target price estimates vary so wildly. The answer often lies ...
  7. Options & Futures

    Stock-Picking Strategies: Fundamental Analysis

    Ever hear someone say that a company has "strong fundamentals"? The phrase is so overused that it's become somewhat of a cliché. Any analyst can refer to a company's fundamentals without ...
  8. Forex Education

    Discount Isn't Always A Great Deal

    Investing online is cheaper, safer and easier than ever before. Find out how to choose the broker that will help you get the most for your money.
  9. Retirement

    Benefit From Senior Discounts

    Older people can save a surprising amount using senior discounts. With Social Security payments flat for next year, this is the time to start using them.
  10. Professionals

    Interest Rates

    Interest rates, put simply, are the cost of money. Overall interest rates are determined by the supply and demand for money, along with any upward price movement in the cost of goods and services, ...

You May Also Like

Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center